MSC.Software Reports 27% Fourth Quarter Revenue Growth
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MSC.Software Reports 27% Fourth Quarter Revenue Growth

Core Revenue Growth Excluding Acquisitions Was 13% in the Fourth Quarter and 31% for the Fiscal Year

SANTA ANA, Calif., Feb. 19 /PRNewswire-FirstCall/ -- MSC.Software Corp. , the leading global provider of simulation software, services and systems used in Virtual Product Development environments, today announced financial results for the fourth quarter and fiscal year ended December 31, 2002.

  Fourth quarter highlights include:

   --  Revenues of $101.6 million, an increase of 27% over the
       fourth quarter last year;

   --  Net income of $2.3 million or $0.08 per share, slightly above Company
       guidance for the quarter.

  Fiscal year 2002 highlights include:

   --  Revenues of $344.2 million, up 46% over last year;

   --  Operating income of $6.6 million, excluding restructuring and other
       impairment charges;

   --  Key balance sheet items include $35 million in cash and investments,
       $67 million in deferred revenue and $242 million in shareholders'
       equity.

MSC Software's conference call to discuss the fourth quarter and year end results will be web cast live today at 8:30 am Pacific (11:30 am Eastern) at the Company's website at http://www.mscsoftware.com/ir . It can also be accessed through the following toll-free dial-in numbers: US - (800) 374-0151 or Intl. - (706) 634-4981, referencing MSC Software. An archived version of the conference call will also be available at the Company's website.

"Our revenue growth in the fourth quarter was supported by the fact that we were able to close many of the transactions that had been pushed from the third quarter," said Frank Perna, Jr., chairman and CEO, MSC.Software Corp. "Even without the impact of the third quarter transactions, our systems business was particularly strong, as we saw expanded penetration into our core software and other manufacturing accounts.

"Virtual Product Development and the increasing use of simulation technologies are helping our customers save time and money with their Product Lifecycle Management implementations. Customers are finding significant value in our integrated software, services and systems approach to product delivery. Significant business wins at BMW and a major first tier automotive supplier in the Americas support this fact," continued Mr. Perna.

"We solidified our position in the Desktop and CAD-embedded markets with a number of key product releases including Generative Nonlinear for CATIA V5, and new releases of MSC.visualNastran 4D and MSC.Dynamic Designer. The 2003 release of MSC.Patran began shipping and features numerous enhancements to interoperability among MSC products.

"Although current economic conditions continue to be challenging, the right sizing moves that were executed in FY 2002 will allow us to grow profitably now, and we are well positioned for accelerated revenue growth and improving margins when the economy recovers," concluded Mr. Perna.

For the fourth quarter ended December 31, 2002, MSC.Software reported revenue of $101.6 million, an increase of 27% over reported revenue of $80.1 million for the fourth quarter last year. The reported net income for the fourth quarter was $2.3 million compared with $6.3 million in the fourth quarter last year. Earnings per diluted share were $0.08 compared with $0.21 per diluted share in the fourth quarter last year.

For the fiscal year ended December 31, 2002, MSC.Software reported revenue of $344.2 million compared to $236.1 million of reported revenue in fiscal 2001, an increase of 46%. The pro forma net loss, excluding restructuring and other non cash impairment charges, write off of acquired R&D and cumulative change in accounting principle, for the fiscal year 2002 was ($1.3) million or ($0.05) per diluted share. The reported net loss, including restructuring and other impairment charges, write-off of acquired R&D and cumulative change in accounting principle, was ($51.3) million or ($1.75) per diluted share in fiscal 2002, compared with net income of $10.3 million or $0.47 per diluted share in fiscal 2001.

Americas

In the Americas, revenue increased 18% to $49.8 million in the fourth quarter versus the fourth quarter last year. Revenue increased 55% to $180.5 million for the fiscal year ended December 31, 2002. In the Americas, 75 transactions over $100,000 were signed in the fourth quarter, and the total number of new accounts increased by 240 new names. Key software business completed in the quarter included United Technologies, Delphi, Kodak and Guidant. Key services engagements were completed or are ongoing with customers including Cooper Tire and Ford. Key enterprise systems were delivered to Harley Davidson, Orbitz and Pegasus.

Europe

In spite of very tough economic markets in Europe, MSC.Software's European revenue increased by 8% to $23.5 million in the fourth quarter versus the fourth quarter last year, and increased 24% to $78.9 million in fiscal 2002. Total number of new accounts increased by 57 and the number of transactions over $100,000 totaled 14 in the fourth quarter. Key services engagements were ongoing with BMW, Renault Formula 1 and Jaguar. Major software deals were signed with Eurocopter Germany, British Aerospace and MTU AeroEngines. A total solution including software, services and systems was sold to Ernst- Mach-Institute, a subsidiary of Fraunhofer Gesellschaft, which will use the computing environment for research in the field of high-speed dynamics, including stochastic simulation techniques.

Asia-Pacific

The Asia-Pacific region reported significant revenue growth for MSC.Software, with revenue increasing 75% to $28.3 million in the fourth quarter, and increasing 50% to $84.8 million in fiscal 2002. The total number of new customer accounts increased by 52 new account names. In total 32 transactions over $100,000 were signed in the region in the fourth quarter. Key software contracts were signed with Mitsubishi Motor in Japan and Kwanjin in Korea. Service and system engagements moved forward with Samsung Heavy Industries, Japan Automotive Research and James Hardie Research in Australia.

Outlook

Based on current visibility, the Company expects first quarter revenue and earnings to be within current consensus estimates. In addition the Company is comfortable with the consensus estimates for revenue and earnings for FY 2003.

Invitation

Members of MSC.Software's financial community are invited to attend our Investor and Analyst Day to be held in Santa Ana, CA on Wednesday, March 12th. The day long event will be an opportunity to meet with key members of MSC's management team, see simulation technology in action, and look into the future of Virtual Product Development. Please consult the event website at http://www.mscsoftware.com/ir/events for registration.

About MSC.Software

MSC.Software (NYSE: MNS) is the leading global provider of simulation software, with related services and systems, that helps companies make money, save time and reduce costs associated with designing and testing manufactured products. MSC.Software works with thousands of companies in hundreds of industries to develop better products faster by utilizing information technology, software, services and systems. MSC.Software employs more than 1,500 people in 22 countries. For additional information about MSC.Software's products and services, please visit www.mscsoftware.com .

Except for the historical information contained herein, certain matters discussed in this news release constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Other factors which could cause such results to differ materially from those described in the forward-looking statements include delays in developing, completing, or shipping new or enhanced products, the ability to assimilate acquisitions into MSC's operations, foreign currency translations, and other risks and uncertainties that are detailed in the Company's annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission.

                           MSC.SOFTWARE CORPORATION
                    CONSOLIDATED STATEMENTS OF OPERATIONS
               (Amounts in Thousands, Except Per Share Amounts)

                             Three Months Ended        Twelve Months Ended
                                December 31,              December 31,
                              2002         2001         2002        2001
                                 (Unaudited)               (Unaudited)

   REVENUE:
    Software                $47,675      $51,436      $160,361   $150,342
    Services                 24,835       16,353        87,790     59,224
    Systems                  29,055       12,327        96,000     26,531

     Total Revenue          101,565       80,116       344,151    236,097

   COST OF REVENUE:
    Software                  5,182        7,880        22,468     26,193
    Services                 14,992        9,901        54,299     33,292
    Systems                  26,846       10,755        81,359     22,125

     Total Cost of Revenue   47,020       28,536       158,126     81,610

   GROSS PROFIT              54,545       51,580       186,025    154,487

   OPERATING EXPENSE:
    Research and Development  8,107        5,729        27,368     22,068
    Selling, General and
     Administrative          36,427       32,655       145,520     99,253
    Restructuring and Other
     Impairment Charges          --           --        13,815      1,894
    Write-Off of Acquired
     In-Process R&D              --           --         2,380         --
    Amortization of Goodwill
     and Other Intangibles    1,918        2,703         6,574     10,878

     Total Operating
      Expense                46,452       41,087       195,657    134,093

   OPERATING INCOME (LOSS)    8,093       10,493        (9,632)    20,394

   OTHER EXPENSE (INCOME)
    Interest Expense          3,667          625         8,101      5,239
    Other Expense (Income),
     Net                        765         (330)          165     (1,704)

     Total Other Expense,
      Net                     4,432          295         8,266      3,535

   INCOME (LOSS) BEFORE
    PROVISION (BENEFIT) FOR
    INCOME TAXES AND
    CUMULATIVE CHANGE IN
    ACCOUNTING PRINCIPLE      3,661       10,198       (17,898)    16,859

   Provision (Benefit) for
    Income Taxes              1,384        3,938        (5,869)     6,588

   NET INCOME (LOSS) BEFORE
    CUMULATIVE CHANGE IN
    ACCOUNTING PRINCIPLE      2,277        6,260       (12,029)    10,271

   CUMULATIVE CHANGE IN
    ACCOUNTING PRINCIPLE         --           --       (39,300)        --

   NET INCOME (LOSS)         $2,277       $6,260      $(51,329)   $10,271

   BASIC EARNINGS (LOSS)
    PER SHARE BEFORE
    CUMULATIVE CHANGE         $0.08        $0.22        $(0.41)     $0.50

   DILUTED EARNINGS (LOSS)
    PER SHARE BEFORE
    CUMULATIVE CHANGE         $0.08        $0.21        $(0.41)     $0.47

   BASIC EARNINGS (LOSS)
    PER SHARE                 $0.08        $0.22        $(1.75)     $0.50

   DILUTED EARNINGS (LOSS)
    PER SHARE                 $0.08        $0.21        $(1.75)     $0.47

   Basic Weighted-Average
    Shares Outstanding       29,730       28,569        29,379     20,606

   Diluted Weighted-Average
    Shares Outstanding       30,194       30,322        29,379     21,900


                              PRO FORMA RESULTS
     (EXCLUDING RESTRUCTURING AND OTHER IMPAIRMENT CHARGES, WRITE-OFF OF
                                   ACQUIRED
                    IN-PROCESS R&D AND CUMULATIVE CHANGE)

   OPERATING INCOME
    (LOSS)                   $8,093      $10,493        $6,563    $22,288

   NET INCOME (LOSS)         $2,277       $6,260       $(1,341)   $11,439

   BASIC EARNINGS (LOSS)
    PER SHARE                 $0.08        $0.22        $(0.05)     $0.56

   DILUTED EARNINGS (LOSS)
    PER SHARE                 $0.08        $0.21        $(0.05)     $0.52


                           MSC.SOFTWARE CORPORATION
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                            (Amounts in Thousands)

                                                December 31,   December 31,
                                                    2002           2001
                                                        (Unaudited)

                       ASSETS

   Cash and Investments                            $34,564        $89,540
   Trade Accounts Receivable, Net                   97,636         82,276
   Other Current Assets                             37,177         26,184

     Total Current Assets                          169,377        198,000

   Property and Equipment, Net                      35,511         31,209
   Goodwill and Other Intangible Assets, Net       264,788        173,355
   Capitalized Software Costs, Net                  25,957         25,952
   Other Assets                                     11,641          5,139

     Total Assets                                 $507,274       $433,655

           LIABILITIES AND SHAREHOLDERS' EQUITY

   Borrowings Under Line of Credit                     $--            $--
   Current Portion of Long-Term Debt                13,750             --
   Accounts Payable                                 32,706         22,289
   Restructuring Reserve                             4,207          1,404
   Deferred Revenue                                 67,327         48,578
   Other Current Liabilities                        39,008         31,907

     Total Current Liabilities                     156,998        104,178

   Deferred Income Taxes                            29,243         14,489
   Long-Term Debt, Less Current Portion             40,104             --
   Notes Payable to Shareholders,
    Less Current Portion                            24,470         24,178
   Subordinated Notes Payable, Less Current
    Portion                                          6,817          9,185
   Other Long-Term Liabilities                       7,162          4,653

     Total Liabilities                             264,794        156,683

     Total Shareholders' Equity                    242,480        276,972

     Total Liabilities and Shareholders' Equity   $507,274       $433,655

CONTACT: investors, Joanne Keates, Director, Investor Relations,
+1-714-444-8551, Email Contact, or media, Todd Evans, Media
Relations, +1-714-445-3066, Email Contact, both of MSC.Software
Corp.

Web site: http://www.mscsoftware.com/ir

Web site: http://www.mscsoftware.com/